Finances

We wanted to provide some answers to frequently asked finance questions that hopefully shed some light on the home buying/selling process.

Questions and Answers

Mortgage Basics

A: Fixed and adjustable rate mortgages. A fixed-rate mortgage is a loan with a fixed interest rate for the duration of the 10-year, 15-year, or 30-year repayment period. An adjustable rate mortgage (ARM) is a loan with a varying interest rate during the 5-year, 7-year, or 10-year repayment period.
A: The interest rate is percentage of the loan amount that the lender charges the borrower as interest, while APR stands for “Annual Percentage Rate” and is calculated by adding the interest rate and any other fees from the lender. Rather than settling them upfront, the APR spreads those fees and the interest rate out over the lifetime of the loan as if they were additional monthly payments, and a new rate is calculated. This new percentage is generally higher than the interest rate because it includes the interest plus any extra fees.

The APR is intended to reveal the total costs over time and to help the borrower compare the pros and cons of loans that have different interest rates and fees associated with them, so that they know what the best option is for them.
A: Yes. Title insurance, Escrow, recording fees, home appraisal, credit report, and legal fees all have their own costs that aren’t included in the loan itself. Ask your lender for an itemized list of all that is required plus an estimate of the cost to process the loan.
Why Are They Important

Credit Scores

What is a credit score? Why is it important? What credit score should I aim for? Does my credit score limit my home buying options?

What is a credit score?

Your credit score is a three-digit number that is used to determine how well you manage credit and if you make payments in a timely manner. This number is usually calculated on the 300 to 850 Fair Isaac Corporation (FICO) scale, and the higher your score is, the more likely you will be approved for a loan or mortgage.

Can I monitor my score?

Yes! It is so easy (and free) to check on your credit score, and it’s a great habit to get into so that mistakes don’t slip through and negatively affect your score. It’s also a good way to track your progress if you are trying to rebuild your credit score.


To get low interest rates on my mortgage do I have to have a perfect credit score?

While a perfect credit score is a great thing to always aim for, you can still get low interest rates on your mortgage with a less than perfect one. In fact, the difference in interest rates between an 800 and 850 credit score is minimal.

Credit scores are constantly changing, so even if you don’t have a perfect one now, or perhaps you do, there is no guarantee that it will stay that way. So instead of focusing on keeping the same perfect score, it is best to develop and maintain healthy credit managing habits.


Can I fix my credit score quickly?

There are multiple ways to improve your credit score, but none of them are quick. The point of a credit score is to see healthy credit managing, and that can’t be observed quickly. Quick-fix attempts can actually end up causing more harm than good. Instead, develop a strategy that involves things like timely payments and spending much less than your credit limit allows.

What You Should Know

Down Payments

What is a down payment?

A down payment is the sum of money you pay upfront when you are purchasing a home.

It is usually only a percentage of a home’s purchase price, with the remaining balance met by combining the down payment with a home loan.

How much do I need to save?

Usually the down payment amount is dependent on the loan program you get. Typically, you will want to save anywhere between 3-20% of the home’s sale price in order to qualify for a 30-year conventional loan, but the higher the percentage the better. If you put down less than 20% you might be required to pay mortgage insurance.


Are there other options for me if I can’t save 20%?

Popular alternative loan options will accept 3.5% (and lower) down payments. The most common of these loan options comes from the Federal Housing Administration (FHA) which you can qualify for with only 3.5% down and a good credit score.

Some can also meet eligibility requirements for the Veterans Affairs (VA) loan which has a zero down payment. In addition to these there are both state and local programs to help assist home buyers who want to obtain loans with low down payments.

Have Questions? Please don't hesitate to Contact Us.
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Bill Sheffield Realty is the largest referral company in Northwest Florida by being a real estate company with ties in new technology & lead generation.

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Bill Sheffield Realty

Pensacola, FL
Phone: (850) 261-5133
Email: bill@pensacolahome.com

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